When I sponsored the Orphan Drug Act, we as a country were faced with the following situation:

There were a number of rare but devastating diseases for which no drugs were available. In some cases, the identity of possibly effective drugs was known, but those drugs were not being tested. In other cases, no remedies were on the horizon.The problem was that drug testing is expensive and these drugs had little profit potential because so few people had the diseases that they were designed to treat.

Therefore, Congress enacted the Orphan Drug Act to provide the missing incentives that would encourage development of the drugs to go forward.

The Orphan Drug Act has been extremely successful. Today, 45 or more orphan drugs have been approved by the Food and Drug Administration, and human trials are under way on another 133.

In most cases, companies investing in orphan drugs have made at most a modest profit on drugs used by small populations, well under 200,000 in number. In those instances, the act has worked as intended. But, at hearings held by our subcommittee in February, witnesses identified two serious problems.

First, under the act, the determination as to whether a disease is rare is made close to the time that research is begun, rather than when the drug is placed on the market.

In the case of AIDS, which has a rapidly growing population affected by the disease, drug companies have known for years that the population is likely to exceed the 200,000 cases in the near future. No one can claim that AIDS is an orphan disease for which we need to give incentives to manufacturers in order to encourage drug companies to invest in this research.

To correct this problem, we should allow the FDA to look to the future in deciding whether the 200,000 threshold has been surpassed, for AIDS or any similar disease. An amendment to do this should bring down the price of certain AIDS drugs.

The second problem is trickier.

In three instances, the profit potential of the "orphan" drug was so clear from the beginning that two or more companies were anxious to invest in the product. In the case of one approved orphan drug, sales will reach $200 million in 1991, virtually all paid by the federal government through the Medicare program. The other two products have comparably large markets. These figures translate to very high prices to patients, $10,000 to $30,000 per year in the case of human growth hormone.

If our only goal were encouraging research, then we would not be concerned about the fact that the Orphan Drug Act creates a seven-year monopoly for these blockbuster products.

But we must also be concerned about drug prices. The societal value of innovative drugs is drastically diminished when they cost more than most people can pay. Patent laws are in place to protect drug innovators; a law for rare diseases should not be distorted to give companies a windfall at the expense of patients.

I believe we need to adjust the act. It should continue to apply with full force to the orphan drugs that have only one sponsor - which is the case for all but three of the orphan drugs that have been approved to date.

The Orphan Drug Act would continue to stimulate research on drugs for rare diseases. But where a drug's profit potential is so great that it has many parents competing to invest in its future, it is no orphan and should not have the protection against price competition that the act confers.